UPDATE 2-Impairment hit drags miner ENRC to 2012 loss

Wed Mar 20, 2013 7:42am EDT

* Slides to 2012 statutory loss of 62 pence per share

* Scraps final dividend

* EBITDA down 45 percent to $1.89 billion

* Renegotiates debt with Sberbank to ease pressure

By Clara Ferreira-Marques

LONDON, March 20 (Reuters) - Kazakh miner ENRC took a higher-than-expected $1.5 billion charge on weak aluminium prices, troubles in platinum and the impact of reshuffling operations in Africa, dragging it to a loss in 2012.

The company also scrapped its final dividend, in the face of a tough second half last year, as costs remained high and prices for key commodities including iron ore fell sharply.

London-listed ENRC is battling to restructure a business that grew from its Kazakh base with a more than $5 billion acquisition spree over the past six years and is now struggling with swollen debt. Spending costs last year were more than double the cash ENRC generated.

The company said on Wednesday it was considering unspecified "non-debt financing options", which could include a capital increase or asset sales. It said it had renegotiated the terms of loans from Russia's Sberbank, one of its two main lenders, allowing itself more headroom.

But ENRC, majority-owned by a core group of 5 shareholders, also wants to boost its "free float" of readily tradeable shares, which is under 19 percent, to stay in the FTSE 100 blue chip index. New rules from next January require FTSE 100 members to have a free float of at least 25 percent.

Sources with knowledge of the matter have said the company has been considering a $500 million capital increase to tackle both the debt - more than $5 billion at the end of last year - and the need to have more shares available for sale.

Key shareholders are said to be reluctant.

"We have five major shareholders, their decision will be important for us to proceed. We as a management are fully committed to remaining in the FTSE 100 - and that process has been started," Chief Executive Felix Vulis said.

Chairman Mehmet Dalman later told analysts that the key concern was the free float and not the company's balance sheet, thanks to new credit facilities and improved Sberbank terms.

Also holding up plans for a share increase are questions around the content of two internal investigations following whistleblower allegations of wrongdoing. The first of the two, focused on Kazakhstan, has been filed with UK authorities but the company said it was "comfortable" with the content and planned no action against specific executives.

The second investigation is directed at the company's international operations, mainly Africa.

ENRC did not comment further.

WRITEDOWN

ENRC warned last month that it would take a significant writedown and on Wednesday revealed an impairment charge of $1.2 billion, largely due to a deteriorating aluminium market, weak platinum and the reshuffling of copper projects.

It took a $328 million provision because of a now-unprofitable alumina supply contract with Russia's RUSAL that runs until the end of 2016.

ENRC is the latest large miner to write down the value of boom-year deals as falling prices bite: weak platinum and aluminium prices also hit Anglo American, Rio Tinto and BHP Billiton.

ENRC said there could be further impairments if market conditions deteriorated, specifically for copper.

Weak metal prices and stubbornly high costs in Kazakhstan and elsewhere also ate away at ENRC's core profit, with earnings before interest, tax, depreciation and amortisation (EBITDA) down 45 percent to $1.89 billion, at the lower end of forecasts.

The company posted a basic loss per share of 62 cents, compared with earnings per share of $1.53 in 2011.

It also scrapped a final dividend payment, leaving a full-year payout ratio of 16 percent, based on its interim dividend. ENRC said it remained committed to a 15-20 percent payout.

ENRC shares, down by a quarter since a 2013 peak in February, were down 2.5 percent at 1103 GMT, underperforming a 0.4 percent drop in the broader mining index.

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